Ruling is victory for solar energy

Barry Shear is the president of Eagle Point Solar of Dubuque. The Iowa Supreme Court will decide if the firm should be classified under the law as a “public utility,” the same category as MidAmerican Energy and Alliant Energy.(Photo: Christopher Gannon/The Register)Buy Photo

A nationally watched Iowa Supreme Court ruling in favor of a solar energy company could spur growth of the solar industry throughout the state, advocates said Friday.

A split Iowa Supreme Court ruled Friday that Eagle Point Solar would not violate Iowa law by selling electricity to the city of Dubuque that the company generates through a solar panel installation on the roof of a city building. Industry leaders praise such arrangements, called power purchase agreements, as a key to developing more solar energy.

Earlier this year, the Iowa Environmental Council issued a report finding that the state could supply approximately 20 percent of its energy needs each year through rooftop solar installations. Though solar still lags behind wind energy in Iowa, decreases in costs for solar equipment combined with tax credits are creating a ripe environment for growth, the report said.

The ruling will help tip the scales for solar by legalizing another way for people and governments to pay for solar projects, said Barry Shear, president and CEO of Eagle Point Solar.

"This ruling now makes other solar projects like this viable," he said in a statement. "We can go to any municipality, any university, any wastewater treatment plant, churches ... and we can put solar on their roof or on their property — and they have to come up with zero dollars to do this."

Iowa's main public utility companies, Alliant Energy and MidAmerican Energy, have fought power purchase agreements, arguing that state regulations give them exclusive rights to sell energy in defined territories.

Utilities: This could hurt ratepayers

State law allows power companies to act as monopolies because they have massive fixed costs, such as power plants and lines, that need to be covered.

If energy customers increasingly use electricity purchased through third-party agreements, all ratepayers could suffer when public utilities are forced to make up costs elsewhere, said Justin Foss, a spokesman for Alliant Energy.

Foss also reiterated a hypothetical argument that the company's attorneys made in legal briefs to the court: The ruling in favor of Eagle Point Solar could open power purchase agreements to companies offering less environmentally friendly options.

"This ruling opens it up for this type of generation; does it also apply if somebody wants an electric generator that runs off of whale oil and fluffy kittens?" he said.

Approach reduces solar's up-front cost

Environmentalists and solar industry leaders encourage power purchase agreements because cities or residents interested in installing solar panels can avoid high up-front costs of buying or leasing panels themselves and pay only for the electricity itself.

The agreements help make solar energy cost-effective for governments and nonprofits, since they don't qualify for federal tax credits for solar installations, advocates say.

Twenty-three states, now including Iowa, allow power purchase agreements between customers and private companies that offer solar energy systems, according to information from the Database of State Incentives for Renewables and Efficiency.

The ruling's effects will reverberate to other Midwestern states, including Wisconsin and Minnesota, said Brad Klein, a Chicago attorney with the Environmental Law and Policy Center. The legality of the agreements in those states remain a gray area that hinders progress on solar projects, he said.

"I think it's one of those policies that's important to really nail down," he said. "We're thrilled about the immediate impact this will have in Iowa, but we're really sort of equally excited about the potential for this opinion to lift that cloud of uncertainty."

Dissenting justice: This isn't court's role

The case began after Eagle Point Solar installed solar panels on the city's public works building in 2011 as part of a city program to reduce its carbon footprint.

The Iowa Utilities Board initially ruled against allowing Dubuque to purchase electricity from Eagle Point. A Polk County District Court judge subsequently ruled in favor of the company. The Supreme Court upheld that decision.

The 4-2 decision allowing the agreements drew criticism from Justice Edward Mansfield, who wrote in his dissent that the court shouldn't have stepped into an area of public policy already governed by the Iowa Utilities Board.

"Is it the proper role of the courts to act as experts on the delivery of electrical energy," he wrote. "I would argue it is not."

Justice Brent Appel's ruling for the majority, however, rejected arguments that Eagle Point Solar should be considered a public utility simply because it hoped to sell electricity to the city. The agreement between the company and the city is a customized and limited arrangement that doesn't need greater regulation, he wrote.

"There is simply nothing in the record to suggest that Eagle Point is a six-hundred-pound economic gorilla that has cornered defenseless city leaders in Dubuque," he wrote.

"Indeed, the nature of the third-party (power purchase agreements) suggests the opposite, as the city has entered into what amounts to be a low-risk transaction — it owes nothing unless the contraption on its rooftop actually produces valuable electricity."

Issue debated in Wisconsin

Uncertainty about power purchasing agreements boils in Monona, Wis., where the city had four rooftop systems installed, Tyler Huebner, executive director of renewable energy group RENEW Wisconsin.

The city originally hoped to purchase electricity from the Colorado investment group that owns the panels, he said. Because of legal concerns over that approach, the city opted instead to purchase renewable energy credits, but that practice is also legally questionable, Huebner said.

The Iowa Supreme Court's ruling Friday should signal to Wisconsin legislators to look further at the issue, he said.

"Next door the law is now clear, and we would like it similarly to be clear here in the state of Wisconsin," he said.